Baneasa Shopping City makes entertainment its priority

EUR 19 million has been invested in Baneasa Shopping City’s cinema, Grand Cinema Digiplex, which opens this week. And the expansion doesn’t stop here. Ali Ergun Ergen, CEO of Baneasa Developments, talked to Business Review about the shopping center’s development strategy for the next five years and why it mainly focuses on expanding the entertainment options.

Simona Bazavan

What can you tell us about the cinema, the actual investment and your expectations regarding this addition?
We decided to make this investment because it is an essential component of the offer. We have so far provided a large variety of shopping, fashion and food, but we were quite behind on the entertainment side.

In the middle of the crisis we managed to put together the funds – it cost us EUR 19 million – and finally it is opening. Grand Cinema Digiplex is important for the center. It does not necessarily improve foot fall dramatically. It does not double the visit traffic, but what it does is increase the repeat visits, increase loyalty and extend the time spent in the mall. In this respect it is very important.

Also, technology has advanced greatly in this industry and cinemas are no longer simply places where one can watch movies. This is not a standard cinema but an unconventional venue equipped with digital technology, meaning that it can connect to any event in the world. We expect primarily revenues from ticket sales, obviously, but we also expect to get other content from local and international events and sell tickets for that. A cinema usually has an occupancy rate of about 20-30 percent and here we have 2,634 seats.

Additional products include premium seats in every room which come at a higher price. There are rooms with special sound and others that have retractable seating. We also have VIP rooms which come not only with a different ambience but also with VIP services which include a separate ticketing box and concierge, special loyalty services, a special seating area with sofas, a smoking lounge and a dedicated fully equipped kitchen with a chef and bartenders; we are working on a solution to allow customers to make orders during the movie.

What about other future development plans for Baneasa Shopping City?
We will not stop here. We are in this business for the long run. The area which we are part of is continuously developing and growing and I think that in the next five to ten years there will be more people living here. It is becoming perhaps a seventh district of Bucharest.

So far the market we are serving is mainly made up of a lot of families with kids and a higher disposable income compared to the rest of the city. Kids’ clothing and food are leading the sales and we want to give more to the people.
So we will probably go for more leisure, more entertainment. This is the strategy and this is also the global trend. There will be new extensions. We are planning a new food court, an area with bowling, a fitness center, spa, a large indoor amusement park and areas with more shops.

We don’t yet have official information regarding the timeline and the investment budget. These are plans for the next five years and some have already been approved by the board but a lot depends on what happens with the economy and this area. After this opening we will start the research for our future plans.

How do you see this market evolving in the years to come? How do you think that shopping malls here in Bucharest will look in five years time?
Every single large shopping center in Bucharest has almost the same mix of brands. What makes them different is the location and the architecture, and the management is very important.

But what actually brings people in is not the shops but rather the food and the entertainment. This is what makes people come back. I think that what will happen in the future, and it has already started, is that existing malls will eventually become neighborhood shopping centers. They will mainly get customers from their surrounding area.

What is different in our case is that because we have Ikea, which is a very important part of the retail park, a large Carrefour and now the cinema as well as some exclusive brands, that might attract additional people, but other than this everyone will basically cater to their trade area. Retailers have a similar strategy. A retail brand positioned medium to high does not sell the same merchandise in all its stores. It depends on the location, customers’ purchasing power and their profile. This is something very new.

It’s three years now since the crisis started. What would you say has been the worst period for the local market?
I think the second half of 2009 and first half of 2010 were very hard. For a while people denied what was happening and it took some time until they understood and started downsizing their operations. Consumption dropped significantly and the real impact became visible in the second half of 2009 and the first half of 2010. Afterwards the situation started to stabilize. 2011 is slightly better than last year.

How did Baneasa Shopping City react to the economic downturn?
I think we were the first that reacted in advance to the crisis. We analyzed the figures and came up with some incentives to help the retailers. It is not necessarily rent reductions. Sometimes it was simply support to improve their marketing and sales, postponed payments and in a very few cases we reduced rents. We let some tenants go and brought in new ones. About 30 percent of the tenants have been replaced but given that we have only been on the market for three years this is normal.

This proactive approach has given us a major upper hand. The occupancy rate has never dropped below 97 percent in the last couple of years and now it is 100 percent.
Also the collection performance was never below 97 percent. We started this back in September 2008, unlike other shopping centers, which in the beginning seemed to have nothing to do with the crisis but all of a sudden were faced with huge vacancies. Looking at the figures for the first six months, our traffic has increased 20 percent and sales have gone up by 22 percent.

What can you tell us about the results reported by Baneasa Shopping City last year and what are the estimations for 2011?
Income last year was around EUR 30 million and we are expecting an increase of around 5 percent this year. It is sustainable.

simona.bazavan@business-review.ro

CV Ali Ergun Ergen

Before setting up and managing the Baneasa Shopping City project in the Baneasa retail park, Ali Ergun Ergen worked for Anchor Grup. He was part of
the team that developed Bucuresti Mall – the first shopping mall in Bucharest which opened in 1999 – and went onto manage it. He later set up and managed
Plaza Romania which opened in 2004.

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